DBRS Comments on Brookfield Property Partners L.P.’s Proposal to Acquire GGP Inc. for $23 Per Share

DBRS Limited (DBRS) commented on the announcement by Brookfield Property Partners L.P. (BPY) — the flagship listed real estate company of Brookfield Asset Management Inc. (BAM; rated A (low) with a Stable trend by DBRS) — that it has made a non-binding proposal to acquire all the outstanding shares of common stock of GGP Inc. (GGP; the Transaction), other than those shares currently held by BPY and its affiliates (representing approximately 34% of the outstanding shares). The proposal represents a premium of 21% to the unaffected closing share price of the Company’s common stock of $19.01 on November 6, 2017.

FINANCING PLAN
The total financing amount for the Transaction is estimated to be approximately $15 billion. Each GGP shareholder can elect to receive consideration per GGP common share of either $23.00 in cash or 0.9656 of a limited partnership unit of BPY (BPY units), subject in each case to proration based on a maximum cash consideration of approximately $7.4 billion (50% of the aggregate offer) and a maximum of approximately 309 million BPY units valued at approximately $7.4 billion (50% of the aggregate offer). The source of the cash financing can potentially be a mix of asset-level debt and asset sales.

IMPACT ON BAM’S CREDIT RISK PROFILE
DBRS is of the view that the Transaction, as proposed, will have a neutral impact on BAM’s credit risk profile. DBRS’s assessment of the potential impact is based on DBRS’s expectation of the following positive factors that will result from the Transaction: (1) BAM’s asset management fee, in the form of direct cash revenues to BAM, is expected to increase modestly as a result of an increase in BPY’s capitalization from the acquisition. (2) Fund from operations contributions to BAM from BPY are expected to increase modestly following the acquisition. (3) Cash flow distributions to BAM from BPY could potentially increase in the future. (4) No incremental debt is to be issued for the acquisition at BAM’s corporate level. However, DBRS acknowledges that the quality of the cash flow at BPY is expected to be affected by the incremental debt to be issued for the acquisition. Nevertheless, on balance, DBRS does not expect the Transaction to have a material impact on BAM’s current ratings.

Notes:
All figures are in U.S. dollars unless otherwise noted.

The principal methodologies are Rating Entities in the Real Estate Industry; Rating Companies in the Independent Power Producer Industry; Rating Companies in the Regulated Electric, Natural Gas and Water Utilities Industry; Rating Companies in the Pipeline and Diversified Energy Industry; DBRS Criteria: Rating Corporate Holding Companies and Their Subsidiaries; DBRS Criteria: Preferred Share and Hybrid Security Criteria for Corporate Issuers; DBRS Criteria: Commercial Paper Liquidity Support for Non-Bank Issuers; and DBRS Criteria: Guarantees and Other Forms of Support, which can be found on dbrs.com under Methodologies.

For more information on this credit or on this industry, visit www.dbrs.com or contact us at info@dbrs.com.